Wait on broadband price ruling 'sign of progress'

TOM PULLAR-STRECKER
Last updated 05:00 04/10/2013

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An internet pricing group has welcomed a Government decision to wait for a Commerce Commission ruling before deciding whether to legislate the price of copper broadband services.

The Coalition for Fair Internet Pricing says a statement by Prime Minister John Key that the Government would wait for the commission's ruling this month before deciding its next move was an "early sign of progress".

Coalition spokeswoman Sue Chetwin, who is also chief executive of Consumer NZ, said the group was pleased Key had "desisted from claiming copper network monopolist Chorus ‘could go broke'," without legislation.

The coalition is behind the "Axe the Tax" campaign, which would prefer that price-setting was left to the Commerce Commission. It said the commission would need to be able to demonstrate its final ruling had been arrived at "correctly and free of political interference".

Chetwin called on the Government to withdraw its discussion document, which canvassed the options for legislation, and "discontinue its parallel ministerial consultation process on copper pricing".

Communications Minister Amy Adams issued a discussion paper in August proposing the wholesale price of a copper phone line and broadband connection be fixed at between $37.50 and $42.50 a month.

But IDC Research analyst Glen Saunders said his "gut feeling" was the Government would intervene only if the commission's final determination left a big difference between the wholesale price of copper broadband and entry-level ultrafast broadband pricing.

The Commerce Commission issued a draft ruling in December that would have set the combined wholesale price of a copper line and broadband connection at $32.45, down from $44.98.

Key and Adams expressed concerns that pricing could undermine Chorus' ability to fulfil its contract to build its share of the ultrafast broadband (UFB) network and could dissuade consumers from switching from copper to UFB.

But four days after Adams issued her discussion paper in August, the commission signalled it would not impose such a deep price cut.

The commission has already ruled Chorus should be allowed to charge $23.52 a month for a copper phone line. Its draft determination was that broadband connections should wholesale for $8.93, but if it finalises the price at anything above $13.97, that would bring the combined price into the band considered by the Government in its discussion paper.

Chorus would have the right to seek a higher wholesale price if the Government shelved its proposed legislation. The company has already issued a challenge, asking for the commission to do a "full price principle" review.

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